Fiat Won’t Assume Chrysler Debt
Contrary to what Chrysler LLC said yesterday in video posted on Chrysler’s website, Fiat will not assume any of Chrysler’s debt in the proposed alliance between the two automakers.
Yesterday a video posted on Chrysler’s website explained why the Fiat alliance is good for Chrysler. One reason included Fiat assuming 35 percent of Chrysler’s debt to the U.S. government. “…It [the Fiat alliance] also means being able to pay back taxpayers faster as Fiat would assume responsibility for 35 percent of all Chrysler’s debt to the U.S. government and not a nickel of U.S. taxpayer money would go to Fiat,” according to the video.
However, in a statement issued today by Fiat, the company claims it will not take a stake in any of Chrysler’s current or future debt. The Fiat Group “intends to make absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness to Chrysler.” The alliance, according to Fiat would be purely a platform and technology sharing deal.
Chrysler also issued a statement of clarification today regarding the video claiming Fiat would assume some of Chrysler’s debt. “As a potential result of the ongoing discussion taking place related to the Fiat alliance, Fiat would become an equity holder with the same rights and responsibilities as all other equity holders in a newly restructured company,” reads the statement. “To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt.
The original statement from Chrysler regarding signing the non-binding agreement for an alliance says: “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” The strategic alliance was to be for “strategic assets, to include: product and platform sharing, including city and compact segment vehicles, to expand Chrysler’s current product portfolio.”
In the same video, Nardelli said the Fiat alliance would save around $8-10 billion in development costs as Chrysler wouldn’t have to develop small car platforms Fiat already has.
There are at least four platforms, two engines, and two transmissions in consideration for sharing that could be brought to the U.S. Small cars such as the Fiat 500 and Grande Punto could be sold as small Chryslers in the U.S. The Chrysler-Fiat alliance would also allow Chrysler to leapfrog five or six year in fuel efficient and clean-air technology by using some of the technology Fiat has already developed.
The alliance would not simply be for Chrysler’s benefit either, as it would give Fiat an easier way to make a U.S. comeback that it has been planning for some time.
Source: Chrysler, Detroit Free Press